Investment Workshop 26: Why We Don’t Invest Based on the News

The Wanderer retired from his engineering job at a major Silicon Valley semiconductor company at the age of 33. He now travels the world, seeking out knowledge from other wealthy people, so that he can teach people how to become Financially Independent themselves.

We Read the News So You Don’t Have To!

If the last few weeks has shown us anything, it’s that this crazy world we live in is pretty damned unpredictable.

Last week, we talked about the resurrection of the Republican’s efforts to dismantle Obamacare, an issue we thought had been put to bed months ago. At the time of us writing that, it looked like those efforts were spiralling towards certain doom once again, but then in an 11th-hour arm-twisting session administered by President Trump to rebellious lawmakers, the Republicans managed to pass their health care repeal bill by a single vote.

The House passed legislation Thursday to repeal and replace Obamacare, as Republicans came closer than ever to realizing their seven-year pledge to overturn the Democratic law and remake health insurance for millions of Americans.

The bill now moves to the Senate, where GOP senators have already declared it dead on arrival and are pledging to come up with their own proposal from scratch.

Within minutes of the House passing a bill to repeal the Affordable Care Act, Sen. Lamar Alexander (R-Tenn.) took to the Senate floor to congratulate the other body, and pronounce the legislation all but dead.

So the saga continues, and the fates of millions of people (not to mention millions of early retirement plans) hangs in limbo. Fan-fucking-tastic.

Fortunately, my informal behind-the-scenes conversations with the other FI bloggers suggests that if the Obamacare repeal does come to pass, there are ways of ensuring you can continue to get health care if you get sick without completely screwing over your early retirement plan. We will continue monitoring the situation for our American readers and if it looks like it’s actually going to happen, you can bet we’ll be sharing the strategies you can use to protect your health care right here on Millennial Revolution.

Meanwhile, the world hasn’t just sit idly by watching this health care mumbo jumbo take place. In the last week, a surprise election result in France kicked out every major political party and has elected Emmanuel Macron as the youngest president of France since Napolean Dynamite Bonaparte.

The pro-EU centrist Emmanuel Macron has vowed to unite a divided and fractured France after winning a decisive victory over the far-right Front National candidate Marine Le Pen in the country’s presidential election.

The victory was seen as a stunning rebuke to the rising wave of far-right nationalism that seemed to be sweeping over the world, which is a huge relief. The last time far-right nationalism took over Europe, things…er…didn’t go so well.

And meanwhile on the other side of the world, North Korea stunned the world by threatening nuclear war. Well, that part wasn’t so surprising, but what WAS surprising is that the country they threatened was…China?

North Korea has issued a rare direct criticism of China through a commentary saying its “reckless remarks” on the North’s nuclear program are testing its patience and could trigger unspecified “grave” consequences.

OK…that was…unexpected. Apparently, China of all countries has started to apply sanctions at the request of the Americans in order to increase pressure on Pyongyang. The optics of a communist country cooperating with the West to tamp down another communist country is…unique to say the least.

But We Still Ain’t Gonna Trade On It

So in all this turmoil, how have we reacted in our workshop? We haven’t.

We’ve consistently performed our buys with mind-numbing regularity and steadfastly refused to allow what we read in the news to affect the buy schedule we decided on at the beginning of the year.

That’s not to say we’ve completely ignored the news. Certain information needs to be taken seriously. For example, the slim (but real) possibility that Obamacare may be going away has caused the FI bloggers to restart discussions on how to handle health care without blowing up our early retirement. And Trump’s victory has caused us to head South where our living expenses have plummeted because of his effect on the Mexican Peso.

But we never let the news affect our investment decisions, because that’s what you need to do to build a portfolio of low-cost Index ETFs.

Speaking of which, how has that portfolio been performing?

Turns out, surprisingly well. Our balance at the time of this writing is $5750, from having $5500 invested. That is a 4.5% return so far this year!

That’s pretty damned good considering we’re less than halfway through 2017.

And how would we have done if we had invested based on what we read in the news?

0%

Because if you recall, we started this workshop right after Trump got elected, and I went on the record saying that we were now headed into a global economic recession. So if I had actually listened to that voice in my head that was saying “Run for the hills! The world is on fire!” I would have cancelled the Workshop and just hid in cash. Instead, this is what I said.

We will demonstrate how to invest in a world-is-on-fire everybody-run-for-the-hills goddamned economic collapse. And we WILL make money.

Wow. Check out the swagger on THAT guy, huh? Hope he never finds out how right he was, or his head would SOOOO fucking big.

So to recap, by ignoring the news we have returned 4.5% YTD. If you invested $5500, you made $250. If you invested $100k, you would have made $4500. And if you really went all in, like one reader who wrote to me saying he was planning on following the workshop with his whopping life savings of $500k, that reader (if he followed through) made $22,500.

And Now Onto the Buys…Oh Wait

Now this is where we would normally do our regularly scheduled buys, but because of the weird way the months synced up, our buy would fall on May 9th. So it looks like our bi-weekly buy has shifted a bit from our intended 1st-and-15th buy schedule. As a result we will delay our regularly scheduled DCA until next week so we’re better synced up with the calendar.

See you next week everyone!

WORKSHOP TOOLS

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Disclaimer: The views expressed is provided as a general source of information only and should not be considered to be personal investment advice or solicitation to buy or sell securities. Investors considering any investment should consult with their investment advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decisions. The information contained in this blog was obtained from sources believe to be reliable, however, we cannot represent that it is accurate or complete.

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An interesting read, but they fall into the ol’ “Homeowners have a higher net worth than renters” argument. High net worth is causally linked with higher education and income. Home ownership didn’t pull them up, their higher-paying jobs did.

I recently opened up and funded a self-managed Questrade account (you wee right, it was quite an annoying process to get it set up!). I’m first trying to set up a TFSA & RRSP with Questrade and then move to a taxable account, but I don’t see how to open a TFSA or RRSP using Questrade. If you’re aware how to go about this, could you guys write a post about starting/funding a TFSA/RRSP from scratch using Questrade? Thanks!!

You hit the nail on the head. It can be tempting to adjust your plan based on what is going on out there in the world. However, the stock market is a fickle bitch that you just can’t predict. So, we FIers stay the course and keep shoving as much money as possible into our index funds. I’m looking forward to the discussions regarding health Care.

Hi Wanderer! I opened up a questrade account and found it actually very easy. I was never promoted to send anything my snail mail so Iam wondering if I did something wrong? For identification all I had to do was snapshot my id and upload it to them.

One more question. For Canadians do we need to open a personal capital account to follow along or is that just for the Americans.

This is spot on. You can’t let the news dictate your investment strategies. THAT’S how people lost money in 2008. They panicked and sold. The people who MADE money due to the crash weren’t super investment geniuses, they didn’t steal the money, and they didn’t have any more information than the rest of us. They just stayed the course and kept investing at better valuations.

No matter what Trump, North Korea, or anything else does, Coca-Cola will still sell more cans of soda and McDonald’s will still sell more burgers.

This article could not have been timelier. I was just having a fun discussion with a friend this past weekend. She is new to investing, which good for her and I fully support that she is trying, but she was going on and on about how she watches the news all day to inform her investing decisions…trying to invest just like Warren Buffett…getting rid of stocks that don’t do well after a week or two, blah blah blah. I’m gonna stealthily-ninja-style shoot this over to her inbox. Thanks for shedding some light on this subject!